Industrial consumers ready to pay more for gas, reveals data

Consumers in India are willing to pay almost 14 per cent more than the prevailing market price for spot LNG, e-sales carried out by GAIL (India) has revealed. E-sale is an online price discovery mechanism devised by GAIL that allows consumers to bid.

On August 16, GAIL started its pilot project of e-sales of spot R-LNG that showed domestic consumers — ceramic manufacturers, fertiliser companies, and city gas players — are ready to pay as much as $17/mBtu. The prevailing LNG price in the global market is $12-15/mBtu. In the domestic market, LNG from long-term contracts is being sold at about $8.5/mBtu, while spots are sold at a higher price.

Under this bidding mechanism, GAIL posts an average LNG price on its Web site, based on which consumers bid. Simply put, in this process, the roles of buyers and sellers switch. In an ordinary auction, the buyers compete to obtain goods or service and the prices typically increase over time. In a bidding process mechanism, sellers compete to obtain business and prices decrease over time.

Mr B.C. Tripathi, Chairman and Managing Director, GAIL, said, “The confirmation is given the same day after adjustment to capacity available to each of the customer. Initially, the pilot e-sales project will cover Bhopal zonal office. In the next few weeks, it will cover all the zones.”

With the drop in output of domestically produced gas, the consumers have to buy expensive imported gas. This fiscal, GAIL expects to transport about 117.16 million standard cubic metres per day (mscmd) from various sources (both domestically produced and imported gas).

GAIL has sourced eight cargoes of LNG this fiscal and expects to get another five-six cargoes. “In the next couple of years when our spot gas portfolio increases four- to five-fold, our e-system will ensure the timely consumption and accurate demand assessment,” he said.

The share of natural gas in India's energy mix is around 10 per cent against a world average of around 24 per cent, providing a huge scope for increased utilisation.

Natural gas demand in the country is expected to grow at a rate of 4.7 per cent annually to reach about 600 mscmd by 2030.

From all the domestic sources like production sharing contract regime, coal bed methane, ONGC and Oil India, the availability of gas by 2016-17 would peak at 215 mscmd whereas demand is projected for 442 mscmd.

GAIL is gearing up to tie-up 100-120 mscmd of R-LNG at Dabhol, Hazira and Kochi LNG terminals.